Friday Night Ramblings

Three day weekend! The Daytona 500 on Sunday! Valentines Day is tomorrow ladies and gentlemen. In our house I do all the cooking anyway, but the wife has requested breakfast tomorrow morning for her Valentine present. I never eat breakfast, but I will do my part and grant her request. Make sure you do a little something for the significant other, besides if you buy something you are stimulating the economy!

Odyssey Marine Exploration Update
A while back I shared my position in the stock OMEX. I bought in at $3 and the stock trades now at $4. The latest television series show chronicling the exploits of the company called "Treasure Quest" on the Discovery Channel aired last night. I must say that while the technology and innovation displayed has been pretty amazing, the next segment of shows should try and flesh out some real treasure finds.

The company has shown the ability to find all kinds of ships and recover items with consistency. As of last night's show we have yet to see some real finds that can pay dividends. The footage is already a year old, and the company has been amazing with keeping things quiet. Here is one shareholder hoping for a little more excitement in the coming months!
Full Disclosure: I have a position in OMEX stock.

Poetic Justice
There is something positively hilarious about the drama surrounding the passage of the "Stimulus Bill". Late to circulate the final bill, and weighing in at over 1000 pages long, it seems no member of Congress will really have a chance to read even half of the bill. How on earth is that funny you ask? Well I'll tell you.

The reason the credit debacle happened is due in no small part because clueless mortgage borrowers, seduced with dreams of becoming rich, signed for mortgages they neither read nor understood. It seems perfect that the very bill that tries to fix the mess is receiving the same treatment from our elected officials. "Just sign here please". The US Congress is the perfect "mark" for a used car dealer, or a mortgage originator. Funny and sad at the same time.

Best of the Web
I try and make my reading rounds as I compile ideas to present on the blog. Sometimes I run across writings that are so powerful that I find I think about them most of the day. This happens a few times a week on average and I try and make you, the readers, aware of those pieces. Today I was amazed by the great insight and sharp writing of two separate articles in the same day! It is like a two for one day!

The first gem is from the great site "The Automatic Earth". The host who's pen name is Ilargi has the best take on the "toxic asset" question that has Treasury Timmy G all confused. Opening paragraph from this article:

Ilargi: Prior to a sudden surge on Wall Street just after 3 PM EST today, US financials were losing a lot of money. Undoubtedly, many "experts" will say the financials are hurting because of uncertainty about the Geithner plan. Me, I would turn it around, and say they drop like stones because of certainty, the sort that says there's no way the largest banks in the US and the UK can be saved. There's no shortage of smart voices declaring that it's so very hard to put a pricetag on toxic assets. In reality, it's very easy. All you need to do is put them on sale and see what offers you get. And there's no excuse or reason for a government to enter the bidding process with money that belongs to its taxpayers. If the people themselves want to buy the paper with their own money, fine. But no-one else should have the right to spend it for them

In one paragraph the writer encapsulates my position exactly. Simple, clear, and intellectually solid one wonders why normal joes that write blogs "get it" while the upper echelon of academia is so confused.

The second wonderful read covers two major complaints of mine: Big government and Keynesian clown theory. I hate them both. It should be clear to anyone with a brain why both are terrible, yet both are favored by many still.

Paul Mladjenovic, writing in the Gold Eagle editorial section, skewers both big government and Keynesian theory in one piece! I strongly recommend reading the entire article, but here are the two excerpts I like.

On big government:

The $1 trillion dollar stimulus plan will not stimulate growth in the economy. It will only stimulate the growth of government bureaucracy. Please understand that government doesn't invest in the economy; it SIPHONS resources from the economy. Think of the private economy as a "runner" and the government as the "backpack". Can you really make the runner perform better by loading more and more weight into the backpack? Of course not; you just make it worse for the runner.

I wish I had written that!

On Keynesian Theory:

History clearly tells us that Keynesian economics does not work. At best, it can be a short-term bandage but it is not a long-term solution. Even Keynes admitted that his ideas have flaws that are problematic over the longer term. When someone pointed out the flaws and how they would become realized over the long run , he famously retorted "in the long run we are all dead". Well…he is dead and we are now in "the long run".

I REALLY wish I had written that! Awesome.

Friday Night Entertainment
After a super busy week at work, and a government pork spending hurricane during the week that made me want to puke, I need a little entertainment.

Can We Be Friends?
New friend does not taste like bacon!:

more animals

Great Combat Scene
One of my guilty pleasures is the film "Troy". All star cast, great story, and great action. This clip is from the epic battle between Hector of Troy (Eric Bana) and Achilles of Greece (Brad Pitt). Spears, shields, swords; what else could be more exciting!:


Friday Night Rock Blogging
Again, no requests so I guess nobody checks this section out, or you trust my taste! Either way, away we go!

What do you get when you combine raspy, powerful vocals, piano, great background music, and plenty of rhythm changes? You might wind up with Bonnie Tyler's "Total Eclipse of the Heart":


In general I hate most new music. Only a few songs here or there, or a great band like Audioslave will catch my interest. This one song from Hoobastank has a thunderous baseline and pretty good vocals. The drums are excellent as well. Enough, check out "The Reason":


Before long I will have loaded every song from the Randy Rhoades Tribute Album on this blog. With good reason of course! Here is "Believer" which features some of the best lead guitar work you are ever likley to hear:


From the old school MTV days of cheap videos, take a stroll back in time with Flaco's "Rock Me Amadeus":


Have a good night.

Mortgage Subsidies Equal Kinder, Gentler "Bad Bank" Plan

The warm air has no left the area! Fun while it lasted. Tomorrow is Friday, and I have Monday off! Leave some Friday night rock blogging ideas in the comments if you have a good tune.

Markets Rally on Handouts and Nothing Else
For the past year the only time markets rally is when some kind of new bailout, guarantee, cash injection, surprise interest rate cut or some other gift is bestowed upon the markets. When one cannot do for oneself (grow on fundamentals and sold growth) one is relegated to waiting for others to give them something. Here is today's action in the DOW:

The possible giveaway today was the vague announcement of some kind of Federal subsidy for some mortgages. I will cover that in a moment. Right now I want you to think about what these kinds of rallies mean.

Wall Street is banking on the fact that the US government will rip off you, the taxpayer, in order to support an entire financial system meant to do one thing: make those in the industry rich. Forget all this "systemic risk" garbage. If the FED used 3 trillion dollars for loans made at 5% every single "small business owner and average family" would have all the access to credit they would ever need. The truth is all these bailouts and rescues are meant to support an over leveraged facade that the big banks have created. I need NO OTHER PROOF than the ridiculous rallies that occur every time another bailout plan is announced.

Mortgage Subsidies Equal Kinder, Gentler "Bad Bank" Plan
Treasury head Timmie G had a rough go of it the other day. His detail deficient bank plan was met with laughter and bemusement by almost everyone. No details and no real plan. The "bad bank" idea also is DOA because the banks do not want to face insolvency and because the government does not want to be seen as obviously giving taxpayer money away to banks that were foolish.

The financials were crestfallen (love that word!) at the prospect that their toxic mortgage assets would not be scooped up by Washington. Timmie G, not wanting to be a total loser in his first prime time week on the job did what the best political types do when confronted with a terribly unpopular course of action: He phrases it another way!

The whole "We are going to buy up worthless mortgage backed assets at prices far above what they are worth and stick the taxpayer with the losses" was universally rejected. Chants of "No Way! We will not give away cash to support fat cat bankers at the taxpayers expense!" were common. But now the Treasury has a new and improved message: "We are going to give homeowners in trouble a new, cheaper deal so they can afford to stay in their homes!" I mean that is just pure brilliance. It is all in the packaging.

I refer you to the DOW one day chart above. It is obvious that some kind of giveaway occurred today. And indeed one did. Just what do you think "TOXIC MORTGAGE BACKED ASSETS ARE?" If you guessed that those very assets are underwater mortgages, you just won a free one year subscription to the blog "Economic Disconnect". Oh, it's free already? Well, buy a lollipop or something.

This is a clever way to play the bleeding heart line about keeping deadbeats in their homes. Who do you think is going to pay for this subsidy? Why the taxpayer of course. We will pay inflated prices for homes instead of inflated prices for mortgage backed securities. Some deal. I may note that at first blush the old deal was set at 500 Billion to 1 trillion dollars. The new deal is set at around 50 Billion. I am not quite sure those square with the market euphoria.

I try not to use CNBC except for "breaking news" type things (which they are the #1 source for) because their journalistic skills are, shall we say, lacking. Start with this piece out and see if you can spot the massive disconnect:

Stocks Claw Back as Market Cheers Details
By: Cindy Perman, CNBC.com | 12 Feb 2009 | 04:37 PM ET
Stocks staged a comeback in the final hour of trading Thursday following news that the Obama administration is mulling a new plan to subsidize mortgage payments for homeowners in jeopardy.
In other words, the market finally got what Treasury Secretary Geithner failed to deliver: Details.

Ok, so there is some real details to be had from the Treasury? Sounds great! Let's dive into another article on CNBC with the particulars:

US May Start Subsidizing Some Mortgage Payments
By: Reuters | 12 Feb 2009 | 05:56 PM ET
The Obama administration is hammering out a program to subsidize mortgages in a new front to fight the credit crisis, sources familiar with the plan told Reuters Thursday, firing financial markets.
In a major break from existing aid programs, the plan under consideration would seek to help homeowners before they fall into arrears on their loans. Current programs only assist borrowers that are already delinquent.
Under the evolving plan, homes would undergo a standardized reappraisal and homeowners would face a uniform eligibility test, sources said.
Bank regulators have used 38 percent of gross income as a benchmark for one mortgage relief program. If a homeowner is spending more than that amount on housing, they may qualify for a streamlined loan program, but the Obama administration may choose a lower percentage as a trigger for relief in any new plan.
The Treasury Department was not available for comment Thursday afternoon.

Are you able to process all those details? I mean there were like 1/2 to 1 real facts in that story. I am glad the markets rallied on all the details!

I could pick this mess of a plan apart, and when there actually are some real details I will. For now, just consider:
- A reappraisal is going to be ugly. The hardest hit bubble areas are likely to be 25%-50% lower than the purchase price. What can really be done about that that will not cost huge dollars?
- If 38% of gross income is too much to pay, then the entire East Coast, West coast, Florida Coasts, Phoenix Metro area, and Las Vegas Metro just qualified for the plan. Good luck with that paperwork!
- The vast majority of problem mortgages are held by the people that scammed the lenders by doing stated income loans and other tricks. How does this plan address mortgage fraud? If someone bought a $500k home and their gross income is $45K, are they going to get a deal for a home now priced at $150k, what they can actually afford? Who decides? Where is the cutoff?

See, lots of details! I will include a few choice comments I saw on this for the close.

From the good friend of Economic Disconnect, Lisa at Capitalist Preservation has this post up today:

Are You Kidding Me? Subsidize Who's Mortgage?
Submitted by Lisa on Thu, 02/12/2009 - 15:52
in Market Views & News
Apparently, the Obama Administration is planning to subsidize mortgage payments for borrowers who have "problem loans" (?) and who's homes have fallen in value. These borrowers would be subject to an affordability test before they become delinquent. Fannie Mae and Freddie Mac will be in supporting roles of this new drama.
So, in essence, Miss X has worked her butt off and saved her money to buy a home. She struggles to make the payments, because her raise has been delayed due to economic conditions, but she pays. Next door is Mr. and Mrs. Y. They have always lived beyond their means, and are now so debt-laden that they are having trouble making payments on all that debt, including the mortgage.
But, not to worry! Now, Miss X will be paying more in taxes to help Mr. and Mrs. Y make their mortgage payment!All of this is to try and keep housing prices from falling.
Are you kidding me? There is NO ONE in charge in Washington, D.C. No one...

She has it dead on. I would just love to know that my neighbor is getting a 30% mortgage reduction while I am not. Life is nothing, if not fair. Oh, wait...

From the comments section of this article at Clusterstock:

John said:
Feb. 12, 4:23 PM
This is amazing...I did not buy a house for years because I didn't think the pricing made any sense. Now the government is going to use my tax dollars against me be trying to reinflate the market. I am not paying taxes anymore.

I love that whole "using my tax dollars against me" theme. Spot on.

I would caution the government here. Amorphous handouts to big banks in amounts that really do not mean anything to the average person (what is a Billion anyway?) do engender some angry outrage, but it is muted because the screw job is not tangible. Start letting one half of a neighborhood street get sweetheart deals while the other half has to eat it and like it may not have the kind of effect we would want. As if the government needed more reason to stay the F away from meddling, starting a war among neighborhoods is the usual unintended consequences that we have come to expect from government intervention.

Have a good night.

Odds and Ends

58 degrees here today and tomorrow. It is very welcome, but winter still has plenty of time to run this year. The past couple of nights I have had zero time to write and used mostly short quick hits. Tonight I have plenty of time to write, but I am drawing a complete blank! Go figure.

Good Reading Material
I picked up the novel "Patriots: Surviving the Coming Collapse" by James Wesley, Rawles. The book is a work of fiction that chronicles the collapse of the American economy due to factors such as too much debt, dollar devaluation, and hyperinflation. While the book is not very detailed about the mechanics of said collapse (just a few notes on signs to look for) the bulk of the book is an in depth strategy and preparations study. If you like longs lists of guns, rations, fuels, knives, locations, and farming you will like this book.

I am about 3/4 of the way through after starting last night. The book is scary! I have to say in all honesty that if "the world came to an end" I do not think I have the energy nor the interest in becoming a "survivor". Everything is so tough, and even worse the kind of people that will populate the USA should a collapse happen are best shot on site without any interaction. Not much as a way of life, really. Now if we could melt all the guns and ammo and be left with just swords and our bare hands, I am all in! Still, a fascinating read.

Foreclosures: An Infection, An Accident, or Failure to Pay?
"We need to help families struck with foreclosure"
"50 Billion tapped to combat foreclosures"
"Prevention of foreclosures is very important"

You have all read these types of lines many times. How exactly is one "struck" by foreclosure? Does that happen at a 4-way stop sign when foreclosure hits you from behind? Do you get whiplash as well as a notice of foreclosure?

Will there be a "War on Foreclosure" like the "War on Drugs" or the "War on Smart People"? How does one combat a piece of paper? Scissors I suppose.

Is prevention of foreclosures as key as prevention of 12 years olds having 3 kids? Is there a notice of foreclosure condom to stop transmission?

It seems many in government, as well as many writers, bloggers, etc think a foreclosure is something airborne. Like the flu virus. Or they feel it is just plain bad luck that some get foreclosed on while others do not. Almost purely random in selection it would seem.

To aid others in their time of need here is what you need to know: A foreclosure happens when a mortgage holder does not pay what they are contract bound to pay. These days with all the backlogs this process may not even start for 6 months or more of non payment. That is it. That is all.

Do not even bother with the comments like "I know a women who's husband died suddenly last year and then she was struck by lightning and cannot work and then her youngest child of age 4 was diagnosed with leukemia". For every one in a million stories like that there are literally 1 million other foreclosures where somebody has just stopped paying.

There are many reasons somebody may be foreclosed upon, but they all boil down to one basic fact: they are either unable or unwilling to pay what they agreed to. There need be no other discussion.

As far a trying to refinance people into loans they can afford, you will run into major issues that would seem to preclude any action, but since when does the government care about being fair or doing right. 2 sticking points with foreclosure work outs are:
1.) By rewarding poor behavior, you encourage others to do the same thing
2.) The Taxpayer will have to eat the difference in home price due to the workout. How do you ask someone paying their bills to add on even more bills form people that are not paying?

There will be 50 Billion dollars handed out to flippers, mortgage cheats, illegal aliens, and other fraudulent fools that overpaid for homes. It will do nothing but delay for another 6 months what was always going to happen: FORECLOSURE. But this way we get to pay for even more waste, so i guess it accomplishes something.

Three Generations and then Splat!
Mish has a thought provoking post up today. The piece blends economics with sociology. I must say the concept presented is very persuasive. I will take a fairly long excerpt, but you should read the whole piece with Mish's end thoughts. I am excerpting so that you at least see this section:

It's rare the wealth of a family can last for three generations (the 2nd may see the value of hard work, the 3rd, forget it).
[Mish Note: The following example is based in the South African currency of the Rand, but that does not detract from the message.]

Year zero: First generation: Wealth creation
Starting capital: Zero. The family income generators (2 parents) are hard-working and manage to invest 10% of their after-tax income equating to R30/month into the South African stock market. (Yes, this was pre-Union, but we did say "equating to"). Remember this is the sixties and an income of R300 is a very decent monthly wage.

Year 45: Second generation: Wealth preservation
The parents ensured that their three children didn't have to experience hard times. The children attended decent enough schools and were fortunate enough to mix with similarly privileged friends. There is general unease in the family however, as the second generation gain independence.

The pressures of wanting to keep up with the lifestyles of their wealthier friends, coupled with an unfortunate down-turn in the economy, results in a halt in savings and as a result the R10.5m family wealth no longer enjoys any debit order increases. In addition, the capital base is required to maintain an income for the folks who have now retired.

Year 75: Third generation: Wealth destruction
The second generation finally inherit the family wealth and it is split three ways. By this time the R45,000/month comfortable family living has ballooned to R600,000/month as a result of inflation. Each family now only enjoys income from a capital base of R110m and, because they themselves are approaching retirement they opt to de-risk their portfolios, which results in the capital invested unfortunately realising a more sedate 3% real rate of return.
After a torturous revelation later on in life, one of the 3rd generation children decided to carve out a career as a financial advisor. She made the following insightful observations:

1. Her grandparents did a fantastic job of consistently placing 10% of their monthly income into an equity investment over a 45 year period.
2. As they had generated sufficient capital to live off the dividend income there from, her grandparents had stuck with their equity investment throughout their retirement.
3. Unfortunately, her parents had failed to adopt a savings ethic and they had relied optimistically on their inheritances to generate their own retirement income.
4. The 3rd generation children (herself included) failed to comprehend the importance of generating an income and as a result were unable to adopt a savings plan or meet their own costs.

Time to start again.

Makes sense. My family was poor and has been for as long as any of my relatives can remember. I guess that is why I am such a money watcher. Now that I have been able to elevate to a better level I hereby promise that if I have children I will leave them exactly nothing so that they do not fall prey to easy street thinking. Sorry junior!

Have a good night.

Must See Video

Another one of those days! Crazy busy at work and then all the drama of our economic soap opera. You cannot say that things are boring!

The Bailout to be Named Later
Last night I watched President Obama hold one of the worst press conferences I can remember a president having. Long answers that were short on any substance and several clear contradictions. In one sentence he said "The days of spending more than we make, and living beyond our means are over". He then went on to detail how the US government is the sole entity that can solve the crisis because it will borrow more than it collects in taxes to live beyond its means. Classic. The President had no details on the rescue package, as he wanted to give Tim Geithner "his day in the Sun" to explain the plan. So I waited for today.

I am still waiting.

The big ball of nothing that was announced today was both a waste of time and a dangerous sign that the headliners in charge are still lost. I am not going to cover any of the plan's details that were announced, as those items as well as 80% of the plan are still in flux. Remember that we are told something has to be done ASAP or the world will collapse, but Giethner says the plan will not be put forward "until they get it right". How does he know when the plan is "right"?

I had warned my more liberal friends that when George Bush was gone, things were not really going to change. Without a convenient target to complain about, people might have to come to terms with the fact that George Bush by himself was not responsible for the economic mess. That blame falls squarely on the FED, the Treasury, the SEC, and the US Congress. All the same players are still there. Today's total bemusing display of incompetence means that the old fool Bush may be gone, but the supporting fools are still in charge.

The markets tanked, as should have been expected. Without a clear plan to give away all the money that the banks want, they all hit the "SELL" button. While a rough day, there was no real damage done. The market players were trying to scare the FED and Treasury into quicker action, and I think they will succeed. The "BUY" buttons will be firmly depressed going into weeks end. Silly hissy fit. Great chart from Jesse's Cafe Americain sums up my position on today's action:


Must See Video
More and more details are being uncovered concerning the big scare Hank Paulson gave Congress back in September. Remember the old "tanks in the streets" line? Well it seems things were even worse than we may have known. Any system built on confidence and pure belief is by definition built on nothing at all. Almost all modern banking systems thus fit the "built on nothing at all" description.

This Motley Fool blogger has a great take on the whole thing:

Now, we have another video (actually available since late January), and one which I encourage every Fool not only to watch but to circulate as they see fit, in which Congressman Paul E. Kanjorski of Pennsylvania reveals some shocking information regarding a bank run which occured right here and indeed brought this country and the entire world economy to within three hours of complete and systemic financial collapse. In this video, Congressman Kanjorski reveals (at about the 2:15 mark) that the move to raise the move to guarantee money market funds up to $250,000 was an emergency measure to stave off a massive run on the banks that removed $550 billion from the system in a matter of just a couple of hours. Treasury then injected $105 billion to no avail, and shut the system down to prevent a panic continuation of this electronic bank run. By "their" [read Treasury's] estimation, had they not shut it down and issued the guarantee, money market withdrawls would have reached $5.5 trillion by two 'o'clock that afternoon!! He then indicates Treasury's assessment that the run not only would have destroyed the U.S. economy immediately, but would have collapsed the world economy within 24 hours.

So there you have it, Fools. Britain we know came within 3 hours of utter collapse, and now we see that the U.S. came just as close a month prior! Indeed, the entire world economy came within a day of systemic failure. It makes you wonder... how many hours do we stand from such a scenario at the moment? Further, what warnings can officials from the new administration utilize to influence Congressional votes that could possibly trump those warnings of Paulson and Bernanke on that Thursday evening back in September? These are fascinating and perilous times, and I urge all Fools to keep watching intently. Our modern financial system is gravely ill, and may never recover... we have to be asking ourselves what comes in its place if only as an exercise of due diligence.

Video Here:


It is my firm belief that an event such as the two narrowly avoided in the Fall of 2008 not only WILL occur, but MUST occur. While the Treasury may have stopped a bank run, one must think that plenty of panicked money holders have since resumed their removal of funds but at a much slower pace as to stave off another shut down. I do wonder how the 5.5 Trillion estimate would end the financial world as we know it but 3 trillion dollars in various bailouts can only make things stronger? Anyone want to take that one? Kevin perhaps?

The money you make and have saved up only exists in a notional sense. The only thing backing it up is a collective agreement that it exists. You and I do not matter, but rest assured that the deep pockets will take their money out first, convert it to something with real value (like GOLD) and then exit the collective agreement. Anyone that sees this video must know this to be true.

Have a good night.

Too Much Going On

The full moon was very bright last night. With all the snow cover it was bright enough to read by moonlight around 10pm last night. Pretty wild.

Too Much Going On
Got home a touch late and I have really been swamped trying to get caught up on my reading. Add to this that developments are coming fast and furious as I write, and I simply cannot put together anything coherent this evening. Some quick hits of some things I am looking at:

-from CNBC: 'Bad Bank' Is Dropped From Financial-Rescue Package
Headline is misleading; it seems that the "Bad Bank" idea will not extend to thrifts and insurance companies, but bad asset disposal onto the taxpayer is still in place.

-Old News for Gold Bugs
Latest article by "The Mogambo Guru". As he says, this investing thing is easy!

-I was thinking today that within the next 5 years you will bank at Bank of America, shop at Wall Mart, buy electronics at Best Buy, and get books at Barnes and Noble. All other stores will no longer exist. No choice and no competition.

-When IS Nationalization going to occur?
Jesse's Cafe Americain has some thoughts on this that include a rumor of a bank holiday coming soon.

-Reading some mainstream media and listening to some CNBC I get the feeling that even though the mess we are in has been going strong for around 6 months now, most seem of the opinion that in two quarters things will turn around. Hope is not a plan.

-I caught Obama at the town hall he held in Indiana today. I could sum up with the following line: "The only thing we have to fear is that you all are not fearful enough!" He did not sell the stimulus plan very well at all.

-What happens in California over the next 4 months will show exactly how the United States is going to end up. Call it a free preview.

-One question nobody asks is :"If 1 trillion is going to save us from the economic abyss, why not spend 2 Trillion? Why not 3 trillion? What about 10 trillion?" The answer is both revealing and scary.

-The possible dropping of some aspects of the "Bad Bank" plan should show you once and for all why trading this market with overnight positions is a sure loser. If you were long the banks thinking this plan was in, maybe the banks get clobbered tomorrow on this news. If you were short, maybe this will be seen as positive for the banks in the sense that they do not need the help. Either way, any position is subject to the whim of government intervention. Stay nimble!

-Kevin Depew's 5 Things to Know is a must read today. Number 3 bears careful reading. Remember, the government right now is using authority never before seen. Not good.

Have a good night.

You have No Idea What You are Doing, Do You? So What!

The temperature will reach 50 degrees both Saturday and Sunday. I will try to contain my excitement.

Blogroll Additions and Subtractions
Some changes to the "Must Read" blogroll to the left. I really do not stop by the site "Soot and Ashes" anymore. It has been removed. Two new every day stops have been added. The first is the truly wonderful site, "The Automatic Earth". The writers there are about as insightful on a macro level as you could possibly hope for. Highly recommended. Also added is the site that directed me to the Automatic Earth, Some Assembly Required which is also a must read every day, though tends to be a little political at times. I figure the readers here can handle it!

You have No Idea What You are Doing, Do You? So What!
Sometime you can get brutal honesty. It is rare, but it does happen. Came across this piece that was pure magic and a window into the very essence of what is wrong with the government. Read and enjoy this Briefing Room gem:

Obey on Stimulus Waste: "So What?"
How money is spent should be far from the biggest concern about the stimulus package, its chief author, House Appropriations Committee Chairman David Obey (D-Wisc.) said Friday.

"So what?" Obey asked in response to a question on NPR's "Morning Edition" about the perceived lack of direction from Congress as to how money in the stimulus should be spent. "This is an emergency. We've got to simply find a way to get this done as fast as possible and as well as possible, and that's what we're doing."

Obey said that Congress is not responsible if money is misspent, but rather, whoever spends the money poorly.

"We simply made a decision, which took about three seconds, not to have earmarks in the bill," Obey told NPR. "And with all due respect, that's the least important question facing us on putting together this package."

As Chairman of the Appropriations Committee, Obey had chief oversight in crafting the $825 billion package as passed by the House. The provisions in the bill have been criticized by Republicans and some centrist Democrats for not being as directly related to stimulating the economy as it should be.

""We have more oversight built into this package than any package in the history of man. If money is spent badly, we want to know about it so we can hold accountable the people who made that choice," the chairman said. "And guess what? Regardless of what we do, there will be some stupid decisions made."

At least this guy lays it on the line. I love the name as well, David "you subjects will" Obey.

I do not think I need to add much commentary. If you thought these massive spending plans were being put together on the fly with little to no thinking involved, you were right. If you thought our elected officials were panicked fools, you were right.

What probably galls me the most is that Mr. Obey thinks that he has zero responsibility if things go wrong. The blame will be put on somebody else, but surely not on the very folks that voted for the bill. If the money is wasted (it will be) the Congress will just say "that FED and Treasury did it, not us!" Just like the Iraq war vote. Almost 80% of the Senate and House voted "yes" then sat back and said "I never thought things would go this way". Guess what, that's why you have to THINK before you vote. Once you authorize an action, be it military or economic, you should be held accountable for your actions. It is cowardly and weak to blame others for execution of the very action you authorized.

I could go on, but I do not want to get all riled up on a Friday night. By now you know the score. Come Monday you will know a vague price tag. In the next elections you will know what to do. Let us hope plenty of others wake up from "The Matrix" and give Mr. Obey and all his like their walking papers.

Friday Night Entertainment
A little fun is called for after another wild week. Thanks to all that have been coming by. In the last economic blog rating release Economic Disconnect was finally able to claim the number 100 spot! I am very happy about that. Maybe I could crack into the top 90's in the next update. Miracles do happen.

Fishing Dreams
I am already getting the fishing urge. I even went into the basement and looked through my tackle getting an idea on what I will have to buy for the spring season, you know, to stimulate the economy and all. My favorite place to fish here in Massachusetts is "The Gray Lady" herself, Quabbin Reservoir. The reservoir is immense in size and is home to some rare animals. I have seen otters there, hummingbirds abound, and Moose are seen on the shores. There are even several breeding pairs of Bald Eagles. Here is a picture of one (very center of photo)


Here is a photo of yours truly fishing the Quabbin. Note the reflection of the clouds on the glass-like water:


Friday Night Rock Blogging
Some music for a Friday night. Music is good, cheap, and fun. What else can you say that about? (Get your minds out of the gutter!)

Loyal reader Kevin submitted a song request. It was a bit hard to track down, but I was struck by the great sound and underlying message of the tune. Consider "Gone, Gonna Rise Again" by Michael Johnathon:


I have always loved this song, even though I am not a big Rolling Stones fan. take a listen to "Paint it Black":


Who can forget the metal band Danzig? Well, probably a few people, but not me! I love this song called "Mother":


I know I have had this song on before, but I heard it on the radio today in the lab and now it is STUCK in my head! the raw emotion in the songs' vocals is really something. Here is Concrete Blonde and "Joey":


Last one for the evening, and we need a real ripper. An outstanding Ozzy song is "Over the Mountain". Cryptic lyrics ("I heard them tell me that this land of dreams was now; I told them I had ridden shooting stars and said I'd show them how"), amazing gutair work by the immortal Randy Rhoades, and a wicked tempo combine to make a real treat:


Have a good night.

Honali or Bust!

I had to resolve a total network connection loss tonight so I am a bit short on time. Luckily, as you will see in this post, my material tends to write itself!

Honali or Bust!
"Puff, the magic dragon lived by the sea
And frolicked in the autumn mist in a land called Honali"
-from the song "Puff the Magic Dragon" by Peter, Paul and Mary

Things were looking bad as the day started. Bank of America alone was down over 20% in the early going. We have seen this show before with Bear Stearns, AIG, and Lehman Brothers. The end seemed near and as a Bank of America account holder, I was interested to see just how my money would be handled.

But then things changed. A ripper of a financial stocks rally began and ran all day long turning huge losses into gains by days end. Now understand that huge percentage moves are not too hard with stocks that are single digit midgets (as coined by Todd Harrison at Minyanville), but still this was some action.

So what was the big turnaround catalyst? A "rumor" was being reported by all the major news sites that the draconian measure of "mark to market" was going to get the boot, possibly as soon as next week. You read that right. The banks may soon have full license to play "mark to what I want to" and vastly improve their balance sheets. My speculation is that during the whole "bad bank" talks it became obvious that the black hole of any asset buys was going to expose just how bad off the banks were, even after the government paid huge premiums for junk assets. That would have happened in a mark to market scenario. Hence it is make believe time!

The financial sector may be able to access that storied fantasy land "Honali" where Puff the Magic Dragon lives and waits for impressionable young bankers in need of balance sheet repair. The government is nothing if not kind I guess, though that depends mightily on just who you are.

So playing pretend would not really have an effect when all the players know the truth, right? Wrongo! As I said in the intro, my stuff writes itself and here is my masterpiece of the evening (from Reuters):

Wall Street jumps on bank rescue hope
By Rodrigo Campos Rodrigo Campos – Thu Feb 5, 2:11 pm ET
NEW YORK (Reuters) – Stocks rose on Thursday on investor hopes that the Obama administration's plan to shore up the financial system would include a measure that would help banks stem losses and revive lending.
Traders said investor sentiment was buoyed by talk that Washington would suspend an accounting requirement on the recognition of losses that has resulted in billions of write-downs for banks.
"The notion that you can suspend this mark-to-market provision, which was established after Enron, as way of halting the slide in the value of financials is at the fundamental core of putting on the brakes," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
"The market reaction is a barometer how well (the suspension) could impact market psychology and market value."

The leading early candidate for total moron of the year is a strong one. Peter Kenny writes my blog this evening, so I guess I am grateful.

This whole nasty "mark to market" madness was set up to keep dishonest businesses, like ENRON, from playing too many balance sheet tricks. People went to jail over Enron. There was public outrage. This time around the book making game of Jenga is deemed both good and necessary! This stuff writes itself! Mr. Kenny comes right out swinging saying that playing make believe is the only way to save the banks! Honali or bust indeed!

Not content with just that whopper, Mr. Kenny then goes on to show his total lack of fundamental understanding by asserting that marking to myth a bunch of bank assets will "halt the slide in the VALUE" of the financials. That's rich! If we hold hands, take a Michael Phelps hit of the bong, and fly away to Honali the banks will actually be solvent and have some value! Whoopee! Other than the value of whatever money the taxpayers pour into the banks, they are all ZEROES.

By now any sane player will know you cannot be in many stocks because of crazy intervention wizardry that can manifest at any moment. When the best policy action is to play make believe, you know you have a problem. I really have nothing to add to this thing, I think it stands on it's own merits.

Have a good night. Dream of Unicorns!